Australia has links with many countries around the world via Free Trade Agreements (FTA); an agreement that removes trade barriers between countries. One significant FTA that Australia signed, on 17th June 2015 and entered into force on 20th December 2015, was ChAFTA; China-Australia Free Trade Agreement. Australia has had a strong ongoing relationship with China due to continuous interaction and trade and an extensive and growing economic relationship whereby in 2013–14, two-way trade in goods and services reached $159.7 billion. China is Australia’s largest trading partner, with exports of around $A107.5 billion each year, and $A52.1 billion in imports.
ChAFTA, between China and Australia, has various purposes. Australian exporters faced significant tariff barriers into China and consequently stood at a competitive disadvantage. Hence, one of ChAFTA’s main purposes was to remove tariffs and trade barriers on many goods and services to enhance the economic partnership and opportunities with China. It also aimed to provide greater access to an international market for Australian and Chinese goods, services and investments at a cheaper price, further encouraging trade liberalisation and strengthening bilateral relationships. Moreover, ChAFTA also aimed to create opportunities for employment, reduce barriers to labour mobility and increase tourism by including a Work and Holiday Agreement.
ChAFTA holds significant importance for China and Australia. Importantly, Australia was at a disadvantage in the market share in the rapidly increasing Chinese economy due to China’s existing preferential trade agreements with countries such as New Zealand as evident below.
China had trade barriers on goods and services of interest to Australia and without an agreement to reduce the limitations, Australian exporters couldn’t capitalise on opportunities presented by China’s growing economy. Thereby, the establishment of a trade agreement that abolishes many tariffs and enhances economic development was extremely important for Australia to combat the growing competitive disadvantage which, if continued, would negatively affect Australia’s economy and relationship with China. China is Australia’s largest trading partner and top market for agriculture, resources and services. This agreement helps to maintain this strong relationship and ensures Australia’s affluent longevity, through increased trade, which is paramount for Australia’s future prosperity. It also holds importance for China as it means they can receive quality products to meet the demands of their growing population and middle class at a low price. Also, ChAFTA provided significant economic benefits for both countries and saved various industries from negative economic impacts; evident in table 1.
Negatively, ChAFTA conjured an estimated tariff revenue loss of $160 million in 2015-2016 and $4 150 million over the estimated ChAFTA period for Australia,...